Symphony of Destruction
A New Trading Phase Begins Yesterday, news of a massive central bank cash injection of over $500,000,000,000 was announced to realign Euro-Libor rates and those of other key player countries. This was met with a huge yawn followed by naked fear in the eyes of these knowing bankers. Market youngsters in New York, living high on the hog the past few years think this great game goes on forever. Meanwhile, in trading pits of both New York and Chicago, graybeards, having seen this stuff before, are openly frightened. We know of one very prominent trader and former senior vice president of a big five brokerage house who quietly retired, quite young, to escape forthcoming mayhem. This guy was barely 50 and in charge of millions in retail stock business. Today he is spending time with his children and is far away from trading responsibilities. He resigned a multi-million income position as he knows markets simply will not be manageable in coming months. This man is one of the best gold traders I have ever seen. Central banksters are too late in the game and they know it. The inevitable is on its way and will not stopped. Chopper Ben Bernanke, while trying to appease and walk a thin line has fallen off the Federal Reserve bus and got run-over months ago. You can throw billions at the Sheeple but if they do not borrow, buy nor spend, the toast is burnt. That's our position today. Most consumers are just tapped out. Credit has evaporated. The Federal Reserve's band-aid efforts are irrelevant without effect. Interbank lending has stopped. They do not trust each other to repay big loans. These markets are frozen in time as fear escalates. The first really hard and nasty market slap arrives during spring of 2008 when sell in "May and Go Away" will, for all intents and purposed have the appearances of "Lay Down and Die." If you think those bankers are scared now watch what happens when this baby cracks markets. Our Plunge Protection Team will do handstands using every crummy tool in their box while markets take hits not responding to any more Pollyanna news or, other phony, authoritive-like announcements. Since our Nasdaq hit the wall seven years ago, Greenspan and others have been busy artificially propping-up the economic world composed of the U.S. China, U.K. Japan and Korea. These nations are intertwined more than most imagine. Our key point here is Asia builds the stuff and the junk and America buys it with plastic and other suspect credit. To pay for it, our Federal Reserve and U.S. Treasury work overtime and in tandem to originate and invent new money, notes and bonds. This paper has nothing behind it except dust, fog, smoke and mirrors. Mr. Dollar's value has plummeted in response, providing screaming attention to the world, of our major weaknesses in this global game. When sharks smell blood in the water they detect it miles away circling for the kill. Our trading partners and current and former friends now view the U.S. as a weak sister, a paper tiger getting weaker by the moment. While they should not underestimate American world power, they sense weaknesses and have become emboldened. Putin in Russia is flexing his political and economic muscles and so is China. Other friends, non-friends and substantial trading partners like Japan and the Saudis are backing away from American finance, trade, and our money in an effort to diversify and not sink with the U.S. economic ship. America will soon find itself out in a terrible wind. When a subject is beaten down, has bad luck or, has more than annoyed too many in the world, they are treated openly as with leprosy. First this gets worse then it gets better and then finally it ends. Russia, of all the world players, has a larger dominant position and would be in the best spot to wreak havoc. China's rudeness toward the American Navy recently, as they were turned away from ports after being given permission to dock on two occasions, is an example of this flexing. We would politely suggest they are missing some very important parts of the larger picture and do not hold all the cards they think they have. We shall expound on this point at another time. America appears vulnerable for now but we know of other ideas that quietly and quickly shift the global balance of power back to America when implemented. The U.S. is a badly wounded dog for all outward appearances at this time, but big dogs when hurt, bite viciously hard and with ferocious speed when attacked. Some serious and tragic mistakes were made but the United States will be around for a very long time. Recent estimates tell us the American government has to borrow $2 Billion each day on Asian welfare credit to keep this ship afloat. We suspect that for now, the number is approaching $3 Billion per day and strain is evident everywhere. When the shoe shine boy and store clerks throughout foreign lands prefer Euros or, something else in non-U.S. Dollars, red lights are flashing and warning bells are ringing. We heard this past week about carriage drivers in New York's Central Park making change for European tourists in Euros. High Volatility Markets Ahead We've reported several times over past months that markets' volatility will increase to surprising levels. Expect some day's to be comparative to major market earthquakes as funds and governments jockey for position and control. Days with gold moving $50-$100 lie ahead. Silver for now has a wide daily trading range of 40 to 80 cents in one session. It could become quite a bit more exciting in the near future. There are serious market conditions when the Dow moves over 350 points in either direction. So far these are contained. In May of 2008, our forecast is for far wider ranges. Traders should remember prices always seek a return to median. When they trade and stray too far in either direction the tendency is to return to the middle. Watch the S&P 500 Index Futures Buying Watch the S&P 500 as this index is THE point of control for the Plunge Protection Team. When prices go awry and the PPT wants to fix the problem, they buy S&P futures over the weekend, at night, on the pre-open or, at the end of trading on a very bad selling day. Look closely at this chart and note the long continuation triangle in progress. This triangle's apex lands near the "Sell in May and Go Away" date. When this apex is near, price breaks out either up or, down. We wouldn't bet the farm but are confident price sinks through the bottom. Look at March last year. Expect a repeat with a harder smash. Does it hit in March or, May? Soon we'll find out. Nasty spring housing reports arrive in April, which is why we expect May selling and not so much in March although both should be downers. S&P 500 Index Peaked in October and Sinks Toward New 2008 Lows.
Note the seasonal S&P 500 rally from January through March. The first ten days of January trading ordinarily signal stock market direction for the first quarter. If results are poor we get weakness and selling. If buying is evident, the first quarter should be decent. This is what we expect. The PTT toolbox still holds some strong wrenches to push and pull this market. Never underestimate their prowess in "fixing the prices." This is Our favorite Mining Shares Index Due to It's Shares Composition
Note two rallies in January-February and March through April. As precious metals prices rise after our new year opening in January, these rallies could be stronger than last year as trader-investor-perception-appeal changes from mainstream shares to precious metals shares. The change-over and evolution of this situation will be difficult to trade. For now, we have strong support on the index price of 1150 and the 200 day moving average. Expect a Difficult Transition in 2008 Precious metals shares have been selling with mainstream shares in the down market cycles. All are being treated as similar stocks; never mind the PM's have intrinsically growing value and the others lesser value. This process is gradual. However, sometime in 2008, in our view, traders will decide PM's have the better value and others must be sold. Our difficulty is in identifying this changeover date in the buyer's direction. It will be gradual and not so clear-cut and definite. Do we stay out of the market entirely at the potential shift date in trading or, do we stay invested in the PM market understanding we could take a substantial beating in the spring? Trader Tracks has some ideas for containing this problem and working around it to avoid larger losses and perhaps book some strong gains. Daily Dollar based beneath 75.00 and had a mini-rally after being oversold. Now it faces resistance just under 78.00 on red channel line. On weekly chart, (not shown) it is also resisting against bottom of 17 day moving average.
We think the dollar rally is nearly over and could touch and resist near 78.00 before moving sideways in a normal ABC correction. After this correction, our forecast is more sideways trading action followed by further selling to new lows. In Summary Trading for the rest of 2007 in most markets including our favorites should be mostly year-end house-keeping and wrap-ups. Traders in larger funds are brushing-up portfolios to gain a maximum annual bonus. Most of this is complete as these funds either have a year-end close-out date of November 31 or, December 31. They tossed out their dogs and bought a few new positions. Expectations are for a good rally after New Year's Day in 2008. We expect so too, as that's where all the big-push-equity-money should be going. Trader Tracks Newsletter is preparing a newly recommended, smaller portfolio for our new readers and smaller accounts. Some of these ideas can apply to larger, existing accounts as well. However, we strongly encourage everyone with hard-earned cash on the line to play defense more than ever in the first half of 2008. Do not be afraid to be in the market and be active. But, be careful about containing potential losses. There are several tools available, many not used by our trading audience. We recommend all traders tighten-up the number of differing companies they hold. Portfolios with pages upon pages of companies are just too difficult to manage. Some of the best traders in the world hold only five to ten. Others prefer a more scattergun approach for the mining juniors holding 15-25 knowing full well some will be duds but their truly big winners will deliver for the selected grouping. Our forecast says the world will not end in the near future but could become exceedingly difficult for investors and traders. We like gold and silver and the several trading vehicles available to trade-manage these markets. Energy offers an equally positive situation but a recession could dampen some of these ideas as national economies slow down in later 2008. Dates For Very Rough Markets May of 2008 could rattle the share markets trading trees world-wide. This one could be nasty for the U.S. as well as others. In fall of 2008, on our cycles and time, Eastern, Central and Western Europe sink into hard times along with Japan. In the fall of 2009, the U.S. gets its turn. How bad does it get? It could be worse than most expect but not the end of the world. It will be interesting to watch and see if a bad recession can be contained preventing something worse. Get in tune with these markets despite outside influences playing wrong notes. Gold and silver offer better choices in our opinion as no matter what we get from the economy and markets in 2008; whether it be recession, inflation or, deflation, these metals should deliver the goods. Long term fundamentals rallying precious metals have not changed but improved in our view. Above all control your risk and exposure. Be aggressive in your precious metals trading and when you discover one hot ticket, ride that horse with large positions and take profits at the appropriate time. - Traderrog Roger Wiegand Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information. Contact Claudio Bassi, at Trader Tracks New York City publishing offices for a modestly priced trial subscription 718-457-1426 Monday through Friday, 9:30am to 5pm or, e-mail Claudio at cbassi@miningstocks.com ***
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"Market music from New York, London, Washington, D.C., Hong Kong, and Tokyo is all off-key and getting worse. In our view, the U.S. has been in recession since April, 2007 and our primary trading partners of China, Japan, Korea, United Kingdom, Germany, and others are trending down-all playing the wrong tune. Base metals markets have now confirmed selling is strong and getting stronger. These materials are the gasoline fueling economic boom. Price peaks are in and selling is abundant. Yet, through all of this, our dollar has based and supported very slightly with gold and silver. What does that mean? It means precious metals are diverging from the dollar; largely ignoring it. And, a global power shift in markets is now underway." -
